Tag: Olin Brookings Commission

This is an excerpt of WashU’s summary of the Olin Brookings Commission’s 2023 project. Read more here.

The venture capital (VC) industry has backed some of the most successful American companies and innovation. It is responsible for tremendous growth in pension funds and endowments in recent years and is considered one of the great American inventions, according to Doug Villhard, director of the entrepreneurship program at Olin Business School at Washington University in St. Louis.

It’s well known, however, that the industry does not work well for women, Black and Latinx founders. Despite increased scrutiny on the industry and pledges by VC firms to diversify funding portfolios, funding for women, underrepresented founders has remained persistently low. Just 3% of total VC funds were allocated to these companies last year.

Last fall, the Olin Brookings Commission—a partnership between WashU’s Olin Business School and the Brookings Institution supported by The Bellwether Foundation—assembled a commission of entrepreneurs, venture capitalists and public policy experts to analyze the problem and develop evidence-based solutions to drive more equitable VC funding.

The commission presented their findings and recommendations as outlined in the report, Bridging the Startup Funding Gap for Women, Black and Latinx Entrepreneurs, on April 20 at the Brookings Institution.

Commission member Akeem Shannon, founder/CEO of Flipstik, shared his personal experience in raising funds for his business. “If we want to stay ahead and, more importantly, not fall behind the rest of the global economy, we have to invest in what we have. Let us show you what you’re missing. I think once VCs get a taste of this success, the sky’s the limit.”

Commission members focused their recommendations to address the issue in three categories:

• Increased transparency: When trying to enact change, the first thing you need to do is track where you are today so you can tell whether the strategies are working, Villhard said. Commission members recommended that data leaders like PitchBook and Crunchbase should create options for expanded self-reporting in leading databases and provide a straightforward way for researchers and stakeholders to access and analyze date through a secure platform interface or data sharing agreements. Additionally, investors and mentors should also encourage founders to self-report information in leading databases in respectful ways.

• Government support: Venture capitalists’ one goal is to make the largest possible return for investors, said Morgan DeBaun, AB 2012, a commission member and founder/CEO of Blavity Inc., a tech company for forward-thinking Black millennials. Therefore, the most promising solutions are those that incentivize venture capitalists for making diverse choices, she said.

• Increase public awareness: In the aftermath of George Floyd’s murder and the social unrest that followed, many firms acknowledged there was work to be done to create more equitable funding. We have to hold each other accountable to those commitments as an important first step, Carter said.

Read the entire summary of the Olin Brookings Commission’s work on The Source.

Commission members

• Lori Coulter, co-founder and CEO of Summersalt
• Morgan DeBaun, founder and CEO of Blavity and advisory board member for the Black Economic Alliance
• Martin Hunt, CEO of Swanlaab USA Ventures
• Akeem Shannon, CEO and founder of Flipstik
• Charli Cooksey, founder and CEO of WEPOWER
• Andre Perry, senior fellow at the Brookings Institution

Faculty conveners/PhD students

• Doug Villhard, professor of practice in entrepreneurship, academic director for entrepreneurship
• Daniel Elfenbein, professor of organization and strategy
• Dedric Carter, Olin’s professor of practice in entrepreneurship and WashU’s vice chancellor for innovation and chief commercialization officer
• Gisele Marcus, professor of practice
• Ming zhu Wang, sixth-year Olin PhD student in strategy
• Aditi Vashist, fifth-year PhD student in organizational behavior

PICTURED ABOVE: Commission members, front row from left: Martin Hunt, Lori Coulter, Akeem Shannon, Charli Cooksey and Andre Perry (not pictured, Morgan DeBaun). Back row, faculty conveners and students, from left: Aditi Vashist, Ming zhu Wang, Doug Villhard, Gisele Marcus and Daniel Elfenbein.

Boston University’s Amisha Miller examined 2,000 decisions by a real-world venture capital firm weighing the prospects of startups. Wharton Business School’s Valentina Assenova analyzed thousands of episodes of “The Startup Game,” a simulation played globally that casts students as startup funders or founders as they navigate investment decisions.

And the University of Southern California’s Melody Chang contrasted hundreds of cases of conventional equity funding against cases of the relatively new option of equity crowdfunding. At WashU Olin’s invitation, those three scholars and seven others presented research affirming the woeful inequity in startup funding funneled toward women and underrepresented minorities—and exploring the possible causes and likely effects.

The researchers presented their work at the Brookings Institution in Washington, DC, November 10 to an audience of funders and founders who make up the 2022-2023 Olin Brookings Commission, which is working toward a slate of public policy recommendations to address the inequity.

“I appreciate having my experience validated in the work you all are doing,” said Lori Coulter, MBA 1999, a member of the Olin Brookings Commission. She’s the founder and CEO of Summersalt, a tech-enabled women’s apparel company.

Identifying root causes toward finding solutions

Widely reported statistics—reinforced by the stark data shared last week—show that women and underrepresented minorities bring down about 2% of the startup funding provided to founders in the United States. The commission, funded by a grant from The Bellwether Foundation, began its work on this project in September. The seven-member commission, supported by student workers and academics from WashU and Olin, is exploring root causes for the inequity before crafting policy recommendations that could address it. The commission expects to issue its recommendations in April.

As part of that process, the commission organized last week’s academic conference at Brookings. Researchers globally submitted more than 40 papers for consideration. Ultimately, 10 were invited to present their work, sharing early-stage research work focused on the issue.

“This event wasn’t about finding solutions. It’s about examining root causes, and it was very valuable,” said Christine Aylward, founder and managing partner at Magnetic Ventures and a member of the commission. “I have ideas about solutions, and I’m looking forward to getting to those.”

Causes examined in some of the scholars’ research included unconscious bias or other beliefs that lead to different evaluation standards for startups founded by men versus women—or by white individuals versus individuals of color. For example, presenters at the conference shared research showing male founders were asked “promotion” questions—looking for information about startup progress and prospects. Meanwhile, women were asked “prevention” questions—seeking information about staving off problems or avoiding pitfalls.

Unlocking exclusive networks

Another common theme was the power of “homophily”—the idea that “birds of a feather flock together.” Networks tend to develop among people with common interests and backgrounds, which often leads to people outside those networks being excluded from opportunities. Such attitudes, researchers found repeatedly, often lead to the assumption that minorities and women don’t secure as much funding because there just isn’t a robust pipeline of minority and women founders.

“It is lazy to say it is a pipeline issue. It is lazy to say it’s a talent issue,” Nasir Qadree, founder and managing partner of Zeal Capital Partners, told conference attendees. “If you choose to stay where 80% of capital flows or stay within your own social network, then you are going to continue to see the same types of entrepreneurs. That has yielded a bias in terms of this idea that there’s a pipeline issue.”

One research team from Boston University shared early data from a novel research project begun in early 2021—soon after the May 2020 launch of a newly formed venture capital firm that provides pre-seed investments and mentorship for new startups. “We embedded ourselves in the whole process,” said Siobhan O’Mahony, a professor of strategy and innovation at Boston University. The VC firm, established with the expressed purpose of supporting otherwise marginalized communities, allowed researchers to interview participants throughout the process as the firm whittled down 911 funding applicants to 45.

While their work and data analysis is still ongoing, O’Mahony told conference attendees it was already affirming many of the same observations around investor bias.

Leaving money—and ideas—on the table

Their work also provided affirming data for another oft-observed phenomenon affecting the flow of dollars to URMs and women. Projects conceived in these communities often address needs found in these communities—for example, people living in transit-scarce regions or healthcare for targeting minority populations.

Yet while those needs are identified, conventional investment channels historically and systematically dismiss or undervalue them because the incentives to invest are considered too weak.

“We keep dancing around it, but if you want change, it has to come from the funders,” said Andre Perry, a Brookings senior fellow, professor of practice of economics at Olin and commission member.

The work presented left commission members energized and determined, if in some cases also a little stunned.

“What I heard in this room can make a tremendous difference,” said Martin Hunt, CEO of Swanlaab USA Ventures and a commission member. But, he added, the themes raised by the research also smack of Jim Crow economics. “This work repeatedly speaks to the idea that money is being left on the table by not investing in a broader range of founders. We have to start talking about that. If I’m giving money to my retirement fund and you’re not investing in women, that’s not working. You’re costing me money.”

Pictured at top: Emmanuel Yimfor, a researcher from the University of Michigan, presents work on “What explains the venture capital funding gap for black entrepreneurs?” conducted jointly with colleagues from the Federal Reserve Board and Cornell University at the Olin Brookings Commission’s academic conference November 10, 2022.

Staggeringly disproportionate startup funding available to founders who are women or underrepresented minorities has inspired the next project by the Olin Brookings Commission.

Scholars from WashU Olin Business School and the Brookings Institution have recruited a new seven-member commission—comprised of entrepreneurs, venture capitalists and public policy experts—to develop policy-based solutions for the historically lopsided funding support available to underrepresented minorities and women.

Consider these numbers:

• Women represent 50.5% of the US population, yet recent reports suggest only 2% of venture capital money went to female founders in 2021.
• Individuals identifying as Black or African American represent 13.6% of the US population, but Black founders received only about 1% of venture financing in 2020 and 1.4% in 2021. 
• Individuals identifying as Hispanic or Latinx represent 18.9% of the US population, yet data from Crunchbase, a database of startup funding, suggests Hispanic or Latinx founders receive only about 2% of venture funding.

“This short-changes not only underrepresented founders but also the vitality of the entire innovation community,” said Doug Villhard, faculty commission chair and director of WashU Olin’s entrepreneurship program. “Rather than simply talk about the past, this commission intends to identify meaningful public policy solutions to drive more equitable funding, unlock more potential and further spur our economy.”

Continuation of key partnership

The project is the second backed by a $750,000 grant to WashU Olin from The Bellwether Foundation. The grant called for three separate annual commissions—formed jointly with Brookings—tackling “megatrend” issues affecting the quality of life in the region and across the country.

The first Olin Brookings Commission project concluded in April. Participants developed an artificial intelligence-driven tool to flag suspicious shipments of prescription opioids and developed policy recommendations designed to empower the tool’s use among federal agencies, law enforcement and industry.

Among the initiatives the 2022-23 commission will undertake will be a national conference of researchers presenting work focused on unearthing the root causes for disproportionate funding and informing any potential public and private policy solutions to address the yawning gap.

That conference is planned for November at the Brookings Institution in Washington, DC. The conference organizing committee is chaired by Olin’s Daniel Elfenbein, professor of organization and strategy.

Informed by veteran innovators

In addition to Villhard and Elfenbein, the project will be led by WashU faculty members Dedric Carter, Olin’s professor of practice in entrepreneurship and WashU’s vice chancellor for innovation and chief commercialization officer; and Gisele Marcus, professor of practice, diversity, equity and inclusion.

A key component of the Bellwether funding calls for student involvement. Ming zhu Wang, a fifth-year Olin PhD student in strategy, will organize related research, along with five MBA entrepreneurship fellows who will assist with planning, research and feedback.

A nine-member commission has been named to oversee and guide the project while providing input and insight from the perspective of innovation practitioners. Members include:

• Christine Aylward, founder and managing partner at Magnetic Ventures
• Charli Cooksey, founder and CEO of WEPOWER
• Lori Coulter, co-founder and CEO of Summersalt
• Morgan DeBaun, founder and CEO of Blavity and advisory board member for the Black Economic Alliance
• Martin Hunt, CEO of Swanlaab USA Ventures
• Andre Perry, senior fellow at the Brookings Institution
• Akeem Shannon, CEO and founder of Flipstik

In the next 10 months, commission members will collect and distill data and industry input over several meetings—including the November conference—with plans to release a comprehensive report of its findings and recommendations by April 2023.

Before an audience of policymakers, journalists, scientists and healthcare professionals at the Brookings Institution in Washington, DC—plus dozens more who joined virtually or from a St. Louis watch party—researchers and members of the Olin Brookings Commission outlined their solutions and recommendations to tackle a troubling aspect of the opioid epidemic.

The six-member commission convened multiple times over the past 12 months and on Wednesday presented its work—along with a 53-page overview of the research process, policy recommendations and context—during a midday event at Brookings. The presentation outlined AI-driven tools to curb misdirection of opioid shipments and policy recommendations design to facilitate the use of these tools.

“As I listen to the presentation, I have this sick feeling in my stomach, thinking if we had these tools 10 years ago, how many lives could we have saved?” said Van Ingram, one of the members of the Olin Brookings Commission and executive director of the Kentucky Office of Drug Control.

The group was the first convened by WashU Olin as part of a partnership with Brookings underwritten by The Bellwether Foundation. The project was designed to explore quality of life issues in communities and recommend policy changes to address them.

Focus on diversion of prescription drugs

The inaugural 2021-22 project tackled the opioid epidemic and, more specifically, the illicit diversion of prescription opioids that exploited blind spots in the distribution supply chain, fueling decades of dependency and death. Once researchers had zeroed in on a data-driven answer to that problem, the six-member commission devised a series of policy recommendations to facilitate their use.

“The blind spots still exist,” said Anthony Sardella, the chair of the commission and a member of the research team. “Our goal: Can you use data science to remove these blind spots? With that focus our research was begun.” (See a full list of the 2021-22 Olin Brookings Commission members on the commission’s website.)

According to some reports, more than 100 billion prescription hydrocodone and oxycodone pills were distributed in the United States between 2006 to 2014.

In 2020 alone, approximately 69,700 people died of overdoses involving opioids in the United States.

An AI-driven solution

Olin researchers from the school’s Center for Analytics and Business Insights focused on the patterns of diversion within the drug supply chain using advances in data collection, data mining, artificial intelligence and machine learning. The solution: Olin researchers developed a suite of anomaly detection tools to identify diversion trends in data submitted to a database maintained by the US Drug Enforcement Administration.

Using historical data from the Automation of Reports and Consolidated Orders System (ARCOS) database from 2006 to 2012, including more than 400 million opioid transactions and 277,000 buyers, researchers developed a tool to flag and stop fraudulent opioid shipments before they are diverted. The team identified patterns among likely diverters and tested their findings against a known database of convicted buyers.

The tool is designed to flag future diverters with 100% precision accuracy (i.e., if the tool flags a buyer as a diverter, it is almost guaranteed that the prediction is correct). In other words, the tool will not produce false positives. The team achieved that level of precision accuracy because the tool “lives with” a moderate degree (51%) of recall accuracy (i.e., the tool catches about one-in-two diverters). In other words, the team was willing to live with a higher rate of false negatives to ensure 100% precision accuracy in flagging likely diverters.

Values-based, data-driven work

“This work is emblematic of what WashU Olin Business School represents,” said Mark P. Taylor, the Olin dean who initiated the work to gain the Bellwether grant and partner with Brookings. “We’re dedicated to applying the rigorous use of data and the careful consideration of our principles to go beyond the bottom line, to address and impact critical issues in society.”

Once the research team locked down its anomaly detection tool, the 2021–22 Olin Brookings Commission developed a series of policy recommendations that, in combination, can overcome existing policy obstacles to empower industry and government to work together and implement the team’s near real-time detection and alert system to thwart opioid diversion in the supply chain.

The 14 recommendations include establishing a daily or near real-time pilot for integration of the anomaly detection tool to test the operational methods and modernizing the ARCOS technology infrastructure to support daily or near real-time data entry by registrants. Download the full report of the 2021-22 Olin Brookings Commission.

And the work is not done. The research team intends to further refine its model to potentially look for additional flags—and even techniques for flagging the movement of nonprescription opioids.

“We can determine whether a transaction is supposed to happen or not,” said Annie Shi, a member of the research team and a marketing PhD student at WashU. “For example, if DEA receives a new transaction request, then our model will be able to predict if that transaction is supposed to happen or not. If it is predicted to be suspicious, the DEA will be able to hold off that shipment until further actions are taken.”

Pictured above: Members of the 2021-22 Olin Brookings Commission present policy recommendations to an audience at the Brookings Institution on April 27, 2022. Commission members from left: The Hon. Mary Bono, Dr. Ann Marie Dale, Van Ingram, Gina Papush, Darrell West and Anthony Sardella, commission chair.

Data scientists from WashU Olin have developed a process for flagging suspicious transactions across 100 pharmaceuticals—a process with a stunningly high level of precision and one that can immediately take aim at curbing the country’s decades-long opioid epidemic.

Working with a US Drug Enforcement Administration database that tracked six years’ worth of pharmaceutical transactions, the five researchers developed an “anomaly detection” system that could flag future suspicious shipments with 100% precision.

In other words, as the researchers noted, when their process says a transaction is suspicious, it is. Basically, their anomaly detection system doesn’t flag a transaction unless it’s sure—which does mean some bad buys could sneak under the radar if they don’t meet the system’s criteria.

“The signals of anomaly detection are very strong for these egregiously suspicious buyers,” the study’s authors wrote. “This renders our algorithm very valuable for practical use.”

Built to guide the fight

The system was conceived as a tool to help deploy limited resources as authorities tackle illicit trafficking in narcotics.

“Having 100% precision is a very important feature of our (process),” the research team wrote in its paper, under review with the Journal of Marketing. “We are willing to sacrifice some recall (and increase false negative errors) in order to enable the practical adoption of our proposed algorithm.”

The research team—all associated with Olin’s Center for Analytics and Business Insights—includes Annie L. Shi, a doctoral student in marketing; Seethu Seetharaman, co-director of CABI and Olin’s W. Patrick McGinnis Professor of Marketing; Anthony Sardella, CABI senior research advisor; Michael Wall, co-director of CABI and a professor of practice in marketing; and Chenthuran Abeyakaran, BS ’21/SI ’23.

Their work comes under the auspices of the Olin Brookings Commission, a project operated by WashU Olin and the Brookings Institution to address critical policy issues affecting communities. The project is funded through a grant from The Bellwether Foundation.

Organizers of the first commission under the Bellwether grant focused on the opioid epidemic that’s killed half a million individuals in the US in the past two decades, according to the Centers for Disease Control. In July, the federal government reached a $26 billion settlement with the country’s three major drug distributors and pharmaceutical giant Johnson & Johnson for their roles in the epidemic.

“Addressing this issue and enabling distributors to have a predictive system that can be used to flag and halt suspicious orders of opioid drugs, is the central focus of this study,” the research team wrote in its paper, “Nip it in the Bud! Managing the Opioid Crisis: Supply Chain Response to Anomalous Buyer Behavior.”

Training the anomaly detector

The team “trained” its anomaly detection system by using a recently released DEA database called Automated Reports and Consolidated Ordering System—or ARCOS.

That database tracked millions of prescription drug transactions—their manufacture and distribution—spanning 2006 to 2012. By zeroing in on opioid transactions, with the guidance of a smaller database of known illicit transactions, the research team identified patterns of behavior across 40 different criteria. The scholars also developed a standard they called “morphine milligram equivalents”—or “MME”—to create reliable comparisons among various opioid transactions.

Ultimately, they found that seven criteria were enough to create an extraordinarily precise tool to flag suspicious transactions. For example, when looking at “average MME purchased per transaction,” suspicious buyers purchased almost 10 times as much as legitimate buyers. When they looked at “median MME purchased per transaction,” suspicious buyers purchased almost 20 times as much.

In the context of the research team’s detection and alert system, members of the Olin Brookings Commission will likely investigate proposals that affect public policy affecting the trafficking of illicit narcotics. Some of those policy areas could include:

• data sharing and cross-agency communication;
• revised and modernized data reporting;
• funding sources and spending needs for system maintenance;
• response guidance when transactions are flagged.

Pictured at top: top row, Seethu Seetharaman, Michael Wall, Anthony Sardella; bottom row, Annie L. Shi, Chenthuran Abeyakaran.